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The Treasury market comes into the last trading day of the week sitting almost in the middle of this week’s trading range. With retail sales and a consumer sentiment reading capping off an extremely thin week of US economic reports the Treasury market will get some needed direction on the US economy. However, estimates for the reports today would seem to mirror the state of the economy, which seems to be mostly limping very slowly toward recovery. With the Nikkei managing a noted rise overnight and other equity markets making noted early gains the equity market action might end up being the swing factor for US Treasuries prices later today. In fact, with the S&P, in the very early Friday morning action, managing to reach another new high for the year, that could serve to limit Treasury prices in the face of a slightly softer US retail sales reading. In retrospect, the auction results this week were supportive to prices (even the 30 year bonds) and that clearly helped the market bounce up and away from this week’s lows, but that residual support probably dissipates today as the trade begins to look ahead to next week’s FOMC meeting. While analysts expect the US retail sales reading to post a minor decline, it would seem like the Press and portions of the trade are also poised to discount that decline as another number impacted by adverse February weather. Therefore, the number on its face might provide some initial support, but the capacity to bounce might be limited by ideas that the number doesn’t represent the real state of the US economy.
We are actually somewhat surprised that the Treasury market has been able to sustain the half point bounce off this week’s lows in the face of the new highs for the move in the Nasdaq and S&P in the early Friday morning trade. In the recent past, action in the equity markets seemed to exaggerate views on scheduled data, but unless the retail sales figures come in better than expectations this morning, favorable equity market action could have a difficult time spinning a negative retail sales reading, into a reading that depicts robust recovery action. However, the sentiment figures might take on added importance today, especially if they manage to post an improvement. In short, we can’t argue against an initial pulse up to close-in chart resistance of 116-21 in June bonds and to 116-26 in June Notes, but it could take a surprise rekindling of the Greek debt situation and or a major reversal in equities to give the bull camp definitive control over Treasury prices today. In fact, the Asian trade was seemingly trying to foster talk that the Fed meeting next week bring about some hawkish dialogue from the Fed and that would certainly temper recent claims that US policy would be on hold for a full 6 months. For today’s action, we have to think that the bull tilt will see its best trade in the lead up to the retail sales report, but given the markets capacity to discount soft readings because of the weather, one gets the feeling that the overall trend in the Treasury market is generally set to remain down.
Bond Market Commentary – 2010.03.12
by Dave Hightower on March 12, 2010
Below is a sample of our Daily Commentary. To get this comment, and our daily coverage of 15 additional markets and trade ideas, visit futures-research.com for your free 2 week trial!
The Treasury market comes into the last trading day of the week sitting almost in the middle of this week’s trading range. With retail sales and a consumer sentiment reading capping off an extremely thin week of US economic reports the Treasury market will get some needed direction on the US economy. However, estimates for the reports today would seem to mirror the state of the economy, which seems to be mostly limping very slowly toward recovery. With the Nikkei managing a noted rise overnight and other equity markets making noted early gains the equity market action might end up being the swing factor for US Treasuries prices later today. In fact, with the S&P, in the very early Friday morning action, managing to reach another new high for the year, that could serve to limit Treasury prices in the face of a slightly softer US retail sales reading. In retrospect, the auction results this week were supportive to prices (even the 30 year bonds) and that clearly helped the market bounce up and away from this week’s lows, but that residual support probably dissipates today as the trade begins to look ahead to next week’s FOMC meeting. While analysts expect the US retail sales reading to post a minor decline, it would seem like the Press and portions of the trade are also poised to discount that decline as another number impacted by adverse February weather. Therefore, the number on its face might provide some initial support, but the capacity to bounce might be limited by ideas that the number doesn’t represent the real state of the US economy.
We are actually somewhat surprised that the Treasury market has been able to sustain the half point bounce off this week’s lows in the face of the new highs for the move in the Nasdaq and S&P in the early Friday morning trade. In the recent past, action in the equity markets seemed to exaggerate views on scheduled data, but unless the retail sales figures come in better than expectations this morning, favorable equity market action could have a difficult time spinning a negative retail sales reading, into a reading that depicts robust recovery action. However, the sentiment figures might take on added importance today, especially if they manage to post an improvement. In short, we can’t argue against an initial pulse up to close-in chart resistance of 116-21 in June bonds and to 116-26 in June Notes, but it could take a surprise rekindling of the Greek debt situation and or a major reversal in equities to give the bull camp definitive control over Treasury prices today. In fact, the Asian trade was seemingly trying to foster talk that the Fed meeting next week bring about some hawkish dialogue from the Fed and that would certainly temper recent claims that US policy would be on hold for a full 6 months. For today’s action, we have to think that the bull tilt will see its best trade in the lead up to the retail sales report, but given the markets capacity to discount soft readings because of the weather, one gets the feeling that the overall trend in the Treasury market is generally set to remain down.
Tags: Bonds, Financials, Interest Rates, Notes
About Dave Hightower